Articles Published in: February 2017

February 28, 2017

FHA Loan Rules On Occupancy And Second Homes

Occupancy is a key issue for FHA single family home loans. When you purchase a residence with an FHA mortgage, one of the requirements loan approval is conditional upon is that the borrower is expected to occupy the home as the primary residence, usually within 60 days of the loan closing. Occupancy is required for both new purchase and FHA cash-out refinancing loans. That’s one reason why FHA loan rules in HUD 4000.1 specify that FHA mortgages can’t be used for vacation properties, timeshares, etc. HUD 4000.1 states clearly, on page 135, the “standard for owner occupancy” which includes the following: “At least one Borrower must occupy the Property within 60 Days of signing the security instrument and intend to continue occupancy for at least one year. 203(k) Rehabilitation products | more...

February 28, 2017

FHA Well Water Requirements: A Reader Question

By Joe Wallace

What do FHA appraisal requirements have to say about the testing of well water? A reader got in touch with us recently to ask us about well water testing: “Is there an automatic testing of the well required just because it is surrounded by extensive farm land? I know that is required for USDA but wasnt aware that FHA required it. A reviewer is telling me it is in the 4000.1 Handbook and I dont remember seeing that.” The answer to this particular question is addressed in HUD 4000.1 on page 495, but before we get to the specifics, it’s important to point out that FHA loan standards are often not the only ones that must be met in situations like these. The local health authority may require testing of | more...

February 27, 2017

Types of Homes Eligible For FHA Mortgages

By Bruce Reichstein

What kinds of property types can be purchased with an FHA mortgage loan? It’s a simple question, but there are some occasional misconceptions about FHA requirements for single family homes that borrowers should know about as they plan their mortgage. There are rules on eligible property types that can be purchased with an FHA mortgage loan. These rules are found in HUD 4000.1, and include the following guidance to the participating FHA lender: “FHAs programs differ from one another primarily in terms of what types of Properties and financing are eligible. Except as otherwise stated in this SF Handbook, FHAs Single Family programs are limited to one- to four-family Properties that are owner-occupied Principal Residences.” The phrase, “owner-occupied principal residences” is an important one-FHA mortgage loan rules include an occupancy | more...

February 27, 2017

Mortgage Rate Trends: Third Day Lower

By Joe Wallace

Mortgage rates fell for the third day in a row on Friday, though affected borrowers may have noticed the changes reflected in closing costs rather than an actual interest rate change. We’ve seen rates drop low enough that some market watchers are using phrases like “back to 2017 lows” and “lowest levels of the year”. The mortgage rate trends we’ve seen as of late are within a narrow range, and it’s not clear whether that range will adjust in the short term. In 2017 we’ve seen rates break into the four percent range, even FHA mortgage rates are now moving within that range at the upper end of their current “comfort zone”. At the time of this writing, 30-year fixed rate conventional mortgages are in a best execution range between | more...

February 24, 2017

Child Support Income and FHA Loans

By Joe Wallace

A reader got in touch with us to ask a question about how a participating FHA lender will view child support payments. “My significant other and I want to apply for a house loan together. He technically still pays me child support, but it will end once we own a house together. Can we still count that as part of my income for a home loan? And/or does that effect his income for the loan at all?” There are a variety of factors that could influence the answer to this question. One is state law. Does the borrower live in a community property state? Is the couple legally married and thus subject to such laws where applicable? Does other state law govern how child support and/or alimony can be handled | more...

February 23, 2017

FHA Loan Employment Rules: A Reader Question

By Joe Wallace

A reader asked us a question in the comments section recently about FHA loan rules for employment verification. “I just got denied a FHA loan because I had a gap in employment for only 3 months. I wanted to know does having a gap for only 3 months qualify me for getting denied?” It’s important to remember that FHA loan standards found in HUD 4000.1 (the FHA single family loan rule book) are not the only standards that are recognized or enforced when the lender is processing a home loan application. FHA loan rules, state law, lender standards, and even things that are considered “customary” in the local housing market may all play a part in FHA loan approval and processing. So what’s found in HUD 4000.1 is a good | more...

February 23, 2017

Mortgage Rates: Moving Lower

By Joe Wallace

Mortgage loan interest rates have been moving downwards since our last report, but the moves have been small, and we still see a familiar range of rates. 30-year fixed rate conventional mortgages are still within a best execution range between 4.125% and 4.25%, even after the Fed made statements about future rate hikes. Our sources state that while hikes were mentioned, the information wasn’t quite what was expected and more favorable to mortgage rates (based on investor reaction to the less aggressive news from the Fed). FHA mortgage rates are also hovering in a best execution range between 3.75 and 4.25% at the time of this writing, and it’s unclear whether conditions will bring a return to a sub-four percent FHA rate or not in the short term. In fact, | more...

February 22, 2017

Credit Score Questions

By Joe Wallace

Credit score issues are some of the most popular topics in our comments section-many want to know if their FICO scores are high enough to qualify for an FHA mortgage. One reader asked recently, “(Can) i can buy a (home using) FHA or HUD at a credit score from 500 to 579? With 10% down? How much is 10%?” This reader is referring to a recent blog post about FHA FICO score requirements which included the following: “FHA loan rules state that borrowers with credit scores at 580 or higher are eligible for maximum financing for FHA home loans, which requires a 3.5% down payment from the borrower. For those with credit scores between 579 and 500, 10% down is required.” The short answer to the reader question is that | more...

When Is An FHA Loan Better Than A Conventional Loan?

February 22, 2017

Divorce And FHA Loans: A Reader Question

By Joe Wallace

A reader asks, “I was divorced 5 years ago but he stayed in the house. He is always behind on the payments and it affects my credit. I have divorce papers that state he is solely responsible for the house and payment. Also he was court ordered to get the house in his name but hasnt and the courts wont do anything about it but extend his time. Can I buy a house even though because of his late payments has made my credit score less than 500. How do I handle this?” This reader question should be answered by legal counsel-giving legal advice is outside the scope of this blog, except to recommend that when legal help is needed that it’s best to get the services of someone with | more...

February 21, 2017

Commission Income and FHA Loans: A Reader Question

By Joe Wallace

How does commission income count when applying for an FHA mortgage? A reader asked us recently, “I was denied a mortgage because of a commissioned salary, even though Im full time and am guaranteed 15.75/hr. Interestingly, everything was all ready to go on my measly 12/hour salary before I got this better job. Now Im thinking that may have been a mistake on the part of the lender…” FHA loan rules governing this type of income (as verifiable income that is stable and likely to continue) are found in HUD 4000.1. The reader question does not state as much, but it seems implied that the commission income situation is recent. If so, the lender may need the borrower to have more time on the job as an employee earning commissions | more...